Fender Plans to Jam Out an IPO

The iconic guitar brand is much more than just guitars

Leo Fender, founder of the Fender Electric Instrument Company, brought to life the Telecaster — the first commercially successful solid-body electric guitar. It would help make Fender an iconic brand for the rock ‘n’ roll movement and bring the guitar brand into the pop culture mainstream.

Now, Fender is aiming for the U.S. market mainstream.

The company just announced plans to come public, with JPMorgan (NYSE:JPM) as the lead underwriter and “FNDR” as the proposed ticker. Fender plans to list on the Nasdaq.

Leo Fender started the Fender Electric Instrument Company in Fullerton, Calif., in 1946, and created the Telecaster a few years later. But in the mid-1960s, Leo Fender sold his company to Columbia Records, which now is a part of Sony (NYSE:SNE). Then in 1985, Fender was spun off to a group of managers.

Last year, Fender held the No. 1 position in terms of revenue for electric, acoustic and bass guitars in the U.S. The company has a wide assortment of brands other than Fender, such as Squier, Jackson, Guild, Ovation and Latin Percussion. It also has license rights to Gretsch, EVH (Eddie Van Halen) and Takamine. Not to mention, its guitars have been used by some of the world’s greatest artists, like Jimi Hendrix and David Gilmour.

Still, Fender continues to focus investments on innovative product development. For example, in January the company launched its Fender Select line, which is a premium, hand-crafted production guitar. The Select line should help to boost margins as well as lead to a spike in upgrades.

And Fender is more than just about guitars. In 2007, the company purchased Kaman Music Corporation, which is one of the largest independent distributors of musical instrument accessories.

As a result, Fender now is a sizable business. In 2011, revenues came to about $700 million up from $618 a year earlier, and adjusted EBITDA was around $53 million.

A key growth driver has been international markets, which currently account for 46.7% of net sales. But Fender believes it still has plenty of potential to enter more new countries.

Fender also is getting more aggressive with licensing its brands. And in fact, the company might get traction beyond music, such as for apparel, consumer electronics, mobile and bags. Fender already has put together co-branding deals with Apple (NASDAQ:AAPL), Hard Rock Cafe International and software company SAP (NYSE:SAP).

So in light of its global brands — as well as growth opportunities — Fender should continue to be a top-notch player in the music business. Expect investors to line up for the IPO when it hits the markets within a couple months.

Based in Silicon Valley, Tom Taulli is in the heart of IPO land. On a regular basis, he talks with many of the top tech CEOs and founders trying to find the next hot deals and finding out which start-ups are stinkers.

A long-time follower of the IPO scene, back in 1999 Tom started one of the first sites in the space called WebIPO. It was a place where investors got research as well as access to deals for the dot-com boom. Tom also wrote the top-selling book, Investing in IPOs. In it, he covers all the aspects of analyzing an IPO, such as reading the prospectus, detecting the risk factors and understanding some of the arcane regulations. But don’t worry — if that process is too intimidating for you, thankfully Tom will do the legwork for you right here in the IPO Playbook blog.

Tom is routinely quoted in the media about upcoming deals with his interviews on CNBC and Bloomberg TV, but he is eager to take your questions too. You can message him on Twitter at @ttaulli. And feel free to weigh in via the comments section on any of his IPO Playbook posts.